In South Africa, MTN Group CEO Ralph Mupita has indicated that the strategic rationale for consolidation between MTN and Telkom remains.
In 2022, MTN entered into discussions to buy Telkom in return for shares or a combination of cash and shares.
The announcement was well-received by investors, with Telkom’s share price jumping 30 per cent and MTN’s stock price increasing 5 per cent on the news. However, Rain entered the fray with its proposal. It wanted Telkom to buy Rain for newly issued shares in Telkom.
The announcement muddied the waters as Telkom needed to assure MTN that talks were exclusive, which resulted in MTN walking away from the deal. Earlier this month, Telkom announced that it had terminated discussions relating to Rain’s proposal about a potential acquisition.
Telkom said, “After initial discussions, but before due diligence, the parties have decided that a suitable transaction is not possible at this time.” Commenting on the issue, Mupita said the strategic rationale for consolidation remains. “Nothing of a strategic nature changes in three to six months,” he added.
He said having four mobile players in a market is unsustainable. “You don’t see the third and fourth players having the capacity to invest in their networks,” Mupita said.
“Twenty years ago, it was very different. Then, voice-centric networks did not require as much capital, which means you could have four to six players.”
“Right now, with data networks, it is quite challenging for a number three. It is the case in Nigeria and Ghana.”
The CEO said the wave of consolidation sweeping across other markets is also relevant in South Africa. However, he did not indicate whether they would start discussions with Telkom soon.